Earn-out

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Earn-out

Refers to an additional payment in a merger or acquisition that is not part of the original acquisition cost, which is based on the acquired company's future earnings relative to a level determined by the merger agreement.

Earn-Out

In an acquisition, an additional payment made to the acquired company's former owner(s) in the event that certain earnings are met. For example, a company may acquire another for $75 million, with an additional $10 million in cash and/or stock if the acquired company's earnings outperform expectations by a certain percentage. Earn-outs are based on the acquired company's potential future earnings.
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Mr Hodgson said: 'The new guidelines on earn outs indicate that the application of Income Tax and National Insurance will be brought to bear where the Revenue believes that companies have used earn-outs as a tax avoidance measure, for example where actual remuneration is disguised as additional consideration for shares.
0m and earn outs based on incremental net sales growth of up to USD 26.
In addition, Pen has the right to receive $700,000 of contingent earn outs for a potential total sale price of $4 million.